What's hampering Singapore's push for decentralisation?

There is a dearth of good quality office spaces outside CBD.

The lack of good quality decentralised office space and the narrow rental gap between good quality office spaces in CBD and outside is hindering Singapore's efforts to decentralise the office market.

A new research by JLL revealed that although the concept of office decentralisation was first mooted in the 1991 Concept Plan, the stock of prime decentralised office space was just 10% of the total stock of prime CBD office space at the end of 2016.

"In fact, the stock of Grade A office space in the decentralised sub-market has remained stagnant at 2 million sq ft since 2007, while that in the CBD doubled over the same time. This can partially be attributed to the lower level of state land supply released for office development in decentralised areas compared to that in the CBD in the last 10 years," JLL said.

JLL Singapore head of markets Chris Archibold said as the ratio of Grade A stock in the decentralised sub-market to the CBD tightened from 1:5 in 2007 to only 1:10 by 2016, the rental gap between the two sub-markets narrowed from 56% in 2007 to 34% in 2016.

“Today’s rental gap of 34 per cent between Grade A office space in the CBD and the decentralised sub-market provides little incentive for occupiers to forgo the convenience and prestige of a CBD location for decentralised space," he said.

"Even if occupiers are prepared to look past the lack of cost-savings, there is hardly any good quality decentralised office space available for lease, given that the vacancy rate in that market was tight at 1.6%, at the end of 2016. That said, well-located mixed-use developments are continuing to draw tenants who are looking at the working environment and wellbeing of their staff,” he added.